Perestroika allowed more independent actions from various ministries and introduced some market-like reforms. The goal of the perestroika, however, was not to end the command economy but rather to make socialism work more efficiently to better meet the needs of Soviet consumers.[3] The process of implementing perestroika arguably exacerbated already existing political, social, and economic tensions within the Soviet Union and no doubt helped to further nationalism in the constituent republics. Perestroika and resistance to it are often cited as major catalysts leading to the dissolution of the Soviet Union.

In May 1985, Gorbachev gave a speech in Leningrad in which he admitted the slowing down of the economic development and inadequate living standards. This was the first time in Soviet history that a Soviet leader had done so.

During the initial period (1985–87) of Mikhail Gorbachev's time in power, he talked about modifying central planning but did not make any truly fundamental changes (uskoreniye; "acceleration"). Gorbachev and his team of economic advisors then introduced more fundamental reforms, which became known as perestroika (economic restructuring).

In July 1987, the Supreme Soviet of the Soviet Union passed the Law on State Enterprise. The law stipulated that state enterprises were free to determine output levels based on demand from consumers and other enterprises. Enterprises had to fulfill state orders, but they could dispose of the remaining output as they saw fit. However, at the same time the state still held control over the means of production for these enterprises, thus limiting their ability to enact full-cost accountability. Enterprises bought input from suppliers at negotiated contract prices. Under the law, enterprises became self-financing; that is, they had to cover expenses (wages, taxes, supplies, and debt service) through revenues. No longer was the government to rescue unprofitable enterprises that could face bankruptcy. Finally, the law shifted control over the enterprise operations from ministries to elected workers' collectives. Gosplan's (Russian: Госуда́рственный комите́т по планированию; Gosudarstvenniy komitet po planirovaniyu; "State Committee for Planning") responsibilities were to supply general guidelines and national investment priorities, not to formulate detailed production plans.

The Law on Cooperatives, enacted in May 1988,[4] was perhaps the most radical of the economic reforms during the early part of the Gorbachev era. For the first time since Vladimir Lenin's New Economic Policy, the law permitted private ownership of businesses in the services, manufacturing, and foreign-trade sectors. The law initially imposed high taxes and employment restrictions, but it later revised these to avoid discouraging private-sector activity. Under this provision, cooperative restaurants, shops, and manufacturers became part of the Soviet scene.

Perestroika postage stamp, 1988

Gorbachev brought perestroika to the Soviet Union's foreign economic sector with measures that Soviet economists considered bold at that time. His program virtually eliminated the monopoly that the Ministry of Foreign Trade had once held on most trade operations. It permitted the ministries of the various industrial and agricultural branches to conduct foreign trade in sectors under their responsibility rather than having to operate indirectly through the bureaucracy of trade ministry organizations. In addition, regional and local organizations and individual state enterprises were permitted to conduct foreign trade. This change was an attempt to redress a major imperfection in the Soviet foreign trade regime: the lack of contact between Soviet end users and suppliers and their foreign partners.

The most significant of Gorbachev's reforms in the foreign economic sector allowed foreigners to invest in the Soviet Union in the form of joint ventures with Soviet ministries, state enterprises, and cooperatives. The original version of the Soviet Joint Venture Law, which went into effect in June 1987, limited foreign shares of a Soviet venture to 49 percent and required that Soviet citizens occupy the positions of chairman and general manager. After potential Western partners complained, the government revised the regulations to allow majority foreign ownership and control. Under the terms of the Joint Venture Law, the Soviet partner supplied labor, infrastructure, and a potentially large domestic market. The foreign partner supplied capital, technology, entrepreneurial expertise, and in many cases, products and services of world competitive quality.

Gorbachev's economic changes did not do much to restart the country's sluggish economy in the late 1980s. The reforms decentralised things to some extent, although price controls remained, as did the ruble's inconvertibility and most government controls over the means of production.

By 1990 the government had virtually lost control over economic conditions. Government spending increased sharply as an increasing number of unprofitable enterprises required state support and consumer price subsidies continued. Tax revenues declined because republic and local governments withheld tax revenues from the central government under the growing spirit of regional autonomy. The elimination of central control over production decisions, especially in the consumer goods sector, led to the breakdown in traditional supply-demand relationships without contributing to the formation of new ones. Thus, instead of streamlining the system, Gorbachev's decentralisation caused new production bottlenecks.

Perestroika and Deng Xiaoping's economic reforms have similar origins but very different effects on their respective countries' economies. Both efforts occurred in large communist countries attempting to modernize their economies, but while China's GDP has grown consistently since the late 1980s (albeit from a much lower level), national GDP in the USSR and in many of its successor states fell precipitously throughout the 1990s.[5][citation needed] Gorbachev's reforms were gradulist and maintained many of the macroeconomic aspects of the command economy (including price controls, inconvertibility of the ruble, exclusion of private property ownership, and the government monopoly over most means of production).

Reform was largely focused on industry and on cooperatives, and a limited role was given to the development of foreign investment and international trade. Factory managers were expected to meet state demands for goods, but to find their own funding. Perestroika reforms went far enough to create new bottlenecks in the Soviet economy but arguably did not go far enough to effectively streamline it.

Chinese economic reform was, by contrast, a bottom-up attempt at reform, focusing on light industry and agriculture (namely allowing peasants to sell produce grown on private holdings at market prices). Economic reforms were fostered through the development of "Special Economic Zones", designed for export and to attract foreign investment, municipally managed Township and Village Enterprises and a "dual pricing" system leading to the steady phasing out of state-dictated prices. Greater latitude was given to managers of state-owned factories, while capital was made available to them through a reformed banking system and through fiscal policies (in contrast to the fiscal anarchy and fall in revenue experienced by the Soviet government during perestroika). Perestroika was expected to lead to results such as market pricing and privately sold produce, but the Union dissolved before advanced stages were reached.

Another fundamental difference is that where perestroika was accompanied by greater political freedoms under Gorbachev's glasnost policies, Chinese economic reform has been accompanied by continued authoritarian rule and a suppression of political dissidents, most notably at Tiananmen Square. Gorbachev acknowledges this difference but has always maintained that it was unavoidable and that perestroika would have been doomed to defeat and revanchism by the nomenklatura without glasnost, because conditions in the Soviet Union were not identical to those in China.[6] Gorbachev had lived through the era in which the attempted reforms by Khrushchev, limited as they were, were rolled back under Brezhnev and other prototalitarian conservatives, and he could clearly see that the same could happen again without glasnost to allow broad oppositional pressure against the nomenklatura. Gorbachev cited a line from a 1986 newspaper article that he felt encapsulated this reality: "The apparatus broke Khrushchev's neck and the same thing will happen now."[7]

Another difference is that Soviet Union faced strong secession threats from their ethnic regions and a primacy challenge by the RSFSR. Gorbachev's extension of regional autonomy removed the suppression from existing ethnic/regional tension, while Deng's reforms did not alter the tight grip of the central government on any autonomous regions. The Soviet Union's dual nature, part supranational union of republics and part unitary state, played a part in the difficulty of controlling the pace of restructuring, especially once the new Russian Communist Party was formed and posed a challenge to the primacy of the CPSU. Gorbachev described this process as a "parade of sovereignties" and identified it as the factor that most undermined the gradualism of restructuring and the preservation of the Union. This caused a situation in the USSR whose closest analog would be if English sovereignty undermined that of the United Kingdom at a time when the entire UK society and economy was under significant stress and reform, or if North China had a party and state emerge as a challenge to the CCP and PRC during Deng's reforms.

In the 70 years preceding perestroika, Russian individuals were categorized by scientific and cultural approaches. It was believed that the thought process of a person was strictly designated toward one particular social class. In reality, there were two different classes: the bourgeoisie and the proletariats. This categorization system did not affect everyone, of course, but the general population belonged to one set of minds aside from others.

This approach was used due to its simplicity and ease of enforcement. The task of differentiating a friend from a foe was a remarkably easy thing to do, only in accordance to the “touchstone of class affiliation”.[8] The only way to take out these two conflicting mindsets who battled over the liquidation of the opposing power – hidden undertones of the term liquidation were exile, confinement in a labour camp or physical extermination. According to Stalin, peasants at the time have been liquidated.

At the same time, civilians of Russia didn’t just see deaths as just the physical take on, they saw it as a death of an idea or a new ideology. This destruction of ideas lead to the belief that achievements, artworks or unpublished writings were all intellectual significances that were simply deleted from the face of the earth. This death penalty was a result of refusal to conform to the stated ideal of proletarian culture, science, painting and education along with many other factors. This resulted in an overload of ideologies by the end of the 1920s in the areas of science and education in the Soviet educational system. Russian individuals came up with rather new ideologies: “Everything that was progressive, was considered to be a proletariat way of thinking, and everything “reactionary” were deemed as capitalist ideas and were in need of re-instatement, or even worse, deletion.” At the time, there was no such idea that belonged to the general human value that rose above class boundaries. It was as simple as a community being “our people” or “our enemies”; same goes for individuals.

Before teachers were trained for the job, they were taught the history of ideas from both “progressive” and “reactionary” thinker’s points of view. The information that was learned by these teachers was believed to be the “most progressive” and “scientifically based”. But of course there is also a less successful side to this type of educational teaching: a turn on the situation occurred with the introduction of computers. By this time, any ideas that were present during the perestroika were shaved down. That lead to the beginning of self-criticism of Soviet education by educationalists, which further lead to newspaper articles and journals describing: “never had there been a worse thing than Soviet education.”[citation needed]

On 27 January 1987 a meeting of the central committee members occurred. The CPSU has Gorbachev present his criticism that justifying his policies of perestroika and glasnost are the only solutions to the problems of the Soviet Union.[citation needed]

Over Gorbachev’s time in power, perestroika and glasnost were his most important goals. Economic, social, and political aspects of the Soviet Union have been partly implemented due to these two elements which heighten his seriousness of pushing towards his current objective. Also, Gorbachev’s vigorous campaign for perestroika and glasnost motivated him to move from Moscow to Vladivostok in order to propose his revolutionary changes in the Soviet society.[citation needed]

One of the final important measures taken on the continuation of the movement was a report that was at the central committee meeting of the CPSU titled “On Reorganization and the Party’s Personnel Policy”.[9] This report was in such high demand in Prague and Berlin that many people could not get a copy. One effect was the sudden demand for Russian dictionaries in order to understand the content of Gorbachev’s report.

Women in the USSR were considerably knowledgeable and skilled. Women’s activism, due to the prominent position of women in Soviet society, played a key part in the speed at which perestroika affected the USSR.

Gender equality was granted as early as 1918. In the later years, organizations focused on the implementation of women into public life. They were allowed to teach, work and manage boarding schools and orphan homes for abandoned children.[10] In the following years, the Soviet Women’s Committee was established and had broadened its network across the country. This committee focused upon assisting women to find employment and defending the Soviet Union. During the first years of perestroika, the women’s councils were granted independence and varying levels of political significance. Not all of the women’s councils survived the post-perestroika years, but others managed to pull through, independently leading themselves forward – which signifies the success of the council.

During the time of perestroika, women were increasingly able to voice their concerns and difficulties of gender inequality. The activism of women may be broken down into two general sections: one of which were during perestroika (1985–1991) and the other being post-perestroika: 1991–1993. During the first stage, the number or councils expanded in numbers rapidly, that by the end of the event, there were a total of 300 registers women’s organizations in Russia. Until this day, five of these organizations have international status, two of them have a national status and as many as fourteen have a republican status.

All of these organizations around the country focused on similar things, but placed most emphasis on gender equality. Throughout these different councils, a vast array of activities was established to enhance the amount and types of information a woman can learn in the Soviet Union. For example, the activities ranged from economic focus like providing services, running small businesses and training to more general employment jobs like political lobbying and raising women’s advocacy. It is important to note that some female political leaders like Larisa Bogoraz, Valeria Novodvorskaya and Elena Bonner all established their power with the assistance of these organizations.